China Securities Co., Ltd.: Short-term supply expectations suppress lithium prices, downstream demand supports a lack of weak season in the third quarter.

China Securities Co., Ltd. issued a research report stating that last week, lithium prices fell significantly due to expectations of loose supply, mainly because Jiangxi lithium mines will resume production and Zimbabwe lithium concentrate will arrive in July, but the concentrate maintains a tight reality pattern. Some lithium salt factories have reduced production due to tight raw materials and maintenance factors, resulting in a decrease in production of spodumene and mica during the week. Meanwhile, inventory continued to be depleted, with some sporadic sales supporting prices. There is no need to worry too much about demand, as new production capacity is expected to be completed and climb in the second half of the year, amplifying the downstream restocking effect and increasing marginal consumption. In terms of demand, the subsidy decline of new energy vehicles in 2027 will solidify the rush to install within the year, enhance production expectations in the second half of the year, and the growth rate of commercial vehicles is optimistic, increasing by 36% year-on-year in the first half of the year, with pure electric vehicle exports reaching 1.833 million vehicles from 1-5 May, a year-on-year increase of 114.4%. Looking at the third quarter, it is expected that July and August production will both maintain positive growth compared to the previous month, with no slowdown in the off-season, and the peak season can be expected. Lithium: According to Bachiyan Yinfu, the average market price of industrial-grade lithium carbonate last week was 155,000 yuan per ton, a 3.1% decrease from the previous week; the average price of battery-grade lithium carbonate was 158,000 yuan per ton, a 3.1% decrease from the previous week. On the supply side, lithium carbonate production is expected to decrease slightly last week. This is mainly due to some lithium salt factories reducing production due to tight raw materials and maintenance factors. The Zimbabwe lithium concentrate has been shipped and is expected to arrive in mid-late July. The signal of resumption of production at the Jiangxi mine and related salt factories has disrupted supply expectations. Customs data show that in June, Chile's lithium salt exports to China reached 15,095 tons, with an average export price of $18,814 per ton, showing a slight increase from the previous month. In terms of inventory, last week's inventory is expected to continue to deplete. Long-term shipments of lithium salt factories are stable, but some sporadic sales have led to a slight accumulation of inventory. Last week, the trading volume among traders increased, with more purchases at low prices in the downstream, shifting inventory from the trading sector to the downstream. Futures warehouse receipts remain relatively high, with warehouse receipts totaling 43,640 tons on the previous trading day. On the demand side, downstream demand remained at a high level last week, with overall production expected to increase slightly in July. The production increase of lithium iron phosphate in July is relatively large, with an expected increase of about 7% compared to the previous month. According to Bachiyan Yinfu's survey of 26 battery companies, China's total battery production reached 296.6 GWh in July 2026, an increase of 7.83% month-on-month. After the price drop, there was an increased willingness among downstream material factories to inquire and purchase at low prices, but there was insufficient willingness to stockpile on a large scale, and actual transactions mainly focused on just-in-time restocking. From a resource perspective, the significance of domestically controlled lithium resources is highlighted. Nickel: Last week, the LME nickel price was $16,655 per ton, up 1.8% from the previous week; the SHFE nickel price was 128,180 yuan per ton, up 0.5% from the previous week. Last week, SHFE nickel inventories were 99,100 tons, LME nickel inventories were 274,600 tons, totaling 373,700 tons, a 0.7% decrease from the previous week. On the supply side, last week, the overall supply of domestic nickel sulfate decreased, and the industry's average operating rate slightly decreased. Some nickel salt companies were affected by downstream price pressures and cost profit pressures. They actively lowered production loads, temporarily shut down some idle production lines for inspection and maintenance, and awaited the start of downstream third-quarter pre-purchase in mid-late August. On the demand side, nickel sulfate demand remained weak last week, with downstream companies mainly using their own inventory, only making long-term just-in-time purchases, without any large-scale restocking activities in the market, and a common phenomenon of price pressure to take goods; in the electroplating field, stable demand was difficult to offset the weakness in the battery sector, and nickel sulfate demand was expected to remain weak in the short term. Rare Earths & Magnetic Materials: Last week, rare earth prices increased. As of last Thursday, the average market price of praseodymium-neodymium oxide was 767,500 yuan per ton, up 0.79% from the previous Thursday; the average price of dysprosium oxide was 1.425 million yuan per ton, up 0.35% from the previous Thursday; the average price of terbium oxide was 6.775 million yuan per ton, up 3.83% from the previous Thursday. From a supply-demand fundamental perspective, there is little room for an increase in supply. As we enter the third quarter, there is temporarily no production situation affected by indicators for separation enterprises, with stable operations in place, environmental assessment capacity restrictions, limited production increases, and some separation enterprises temporarily stopping production using chloride tablets as raw materials. Recycling enterprises continue to operate at a low level. The issue of taxed raw materials is difficult to resolve in the short term, and there are no expectations of increased supply in the market. Demand is gradually improving, as the downstream performance during the off-season in the second quarter was significant, with an increased expectation for demand in the third quarter. Major magnetic material factories have stable long-term contracts and are keeping production stable, with new export orders showing positive prospects. This is mainly due to the stalemate between terminal delivery prices and upstream raw material prices, showing an overall positive outlook for demand in the market.